The dollar is a safe-haven currency and appreciates when global risk goes up. We investigate the dollar’s role for the transmission of global risk to the world economy within a Bayesian proxy structural vector autoregressive model. We identify global risk shocks using high-frequency asset-price surprises around narratively selected events. Global risk shocks appreciate the dollar, induce tighter global ...
This paper examines how news coverage of the European Central Bank (ECB) affects consumer inflation expectations in the four largest euro area countries. Utilizing a unique dataset of multilingual European news articles, we measure the impact of ECB-related inflation news on inflation expectations. Our results indicate that German and Italian consumers are more attentive to this news, whereas in Spain ...
Financial repression lowers the return on government debt and contributes, all else equal, towards its liquidation. However, its full effect on the debt-to-GDP ratio hinges on how repression impacts the economy at large because it alters investment and saving decisions. We develop and estimate a New Keynesian model with financial repression. Based on U.S. data for the period 1948–1974, we find, consistent ...
We investigate the role of monetary policy in stock price misalignments and explore whether central banks can attenuate excessive mispricing as suggested by the proponents of a “leaning against the wind” monetary policy. Decomposing stock prices into expected excess dividends, an equity risk premium, and a mispricing component, we find that prices fall more strongly in response to an increase in the ...
Join us for an insightful presentation on the global impact of COVID-19 on public debt and the challenges it poses for policymakers. This lecture explore the effectiveness of different approaches to reducing debt-to-GDP ratios, considering econometric analyses and historical experiences. Followed by a discussion. Key findings include: Fiscal consolidations: Timely and well-designed fiscal...
The distributional and disruptive effects of energy supply shocks are potentially large. We study the effectiveness of alternative fiscal responses in a two-country HANK model that we calibrate to the euro area. Energy subsidies can stabilize the domestic economy, but are fiscally costly and generate adverse spillovers to the rest of the monetary union: What the subsidizing country gains, the other ...
This dissertation collects empirical work in the field of fiscal and monetary policy, and their interaction. It comprises four chapters. In Chapter 1, I investigate the dynamic effects of tax changes on the cross-sectional distribution of disposable income in the US using a narrative identification approach. I distinguish between changes in personal and corporate income taxes and quantify the distributional ...